(At least, judging by the number of people who took the time to respond.)

Among those responses, a fair number of people had trouble believing it was possible to get rates as low as 1.25%.

Especially given they are paying 4%, 5%, or even more when borrowing from their US brokers.

I understand the skepticism.

And it’s why I decided to pen something a little extra this week; to explain an important concept when it comes to international portfolios.

As you know, many of our clients ask for our help in diversifying their assets outside of the country.

That often also means diversifying out of the US dollar into assets denominated in other currencies like the Swiss Franc, the Euro, the Singapore Dollar or the British Pound, among others.

But having all sorts of currencies in one portfolio presents a bit of a practical problem:

How do you keep track of performance when some investments are in currency A, some in currency B, and so on?

The answer is that most banks and asset managers choose a reference currency – the currency used to keep score of how well things are doing.

For American clients, that’s often the US Dollar. Doesn’t have to be, but often is.

The underlying investments may be held in three or four different currencies, but performance is translated back into dollars so the client can better understand the portfolio and how it’s working.

For the same reason, I used the greenback as the reference currency in my example – to make it easier to show how leverage can be used in this situation.

So with that bit of background, here’s where the 1.25% came from.

The proposed loan was not made in USD; it was borrowed in Swiss Francs.

At the moment, it’s possible to borrow that cheaply in francs. And while borrowing in another currency does introduce something called currency risk (a topic I’ll have to cover at some point down the line), for Americans looking to build an international portfolio that includes Swiss Franc denominated assets, it can make sense.

Hopefully that clears it up.

If you think something like leverage makes sense for you, feel free to get in touch.

Group #1: They are wealth protection focused and realize that diversification is the right strategy for them. They tend to be risk averse and are focused on preserving purchasing power against inflation.

Group #2: They are looking outside the US for stronger gains. Certain asset classes in the US market are looking mighty expensive. Overseas opportunities may offer a better return at lower risk.

Some years ago, most of our active cases fit into the first group. More recently, though, we’ve seen a surge in the second group.

But in today’s missive, I want to briefly talk about something that’s becoming more interesting for certain clients in both groups – the use of leverage in Swiss investment accounts.

Our first foray was the world of Swiss annuities back in the early 90s. At the time, they gave Americans a compliant way to build an offshore foothold with tax-deferred growth – somewhat like a standard retirement account.

Of course, the world changed, as it often does, and Swiss annuities went with those changes. But we’ve never stopped working in Switzerland.

Nowadays, most of our efforts involve helping US clients open Swiss bank and Swiss asset management accounts.

Oftentimes, we’re working with individual accounts, joint accounts, US trusts and US LLCs.

A Little-Known Swiss IRA Opportunity

But did you know it’s possible to move your IRA to Switzerland as well?

I was surprised to learn it some years ago. So are most people when I explain it.

But once I do, their eyes light up. Because:

• Moving an IRA to Switzerland does not create a tax bill (if done properly, of course).

• It doesn’t trigger any pesky foreign reporting requirements… no FATCA, no FBAR, or other paperwork that comes with holding foreign assets.

• Checkbook IRAs are a possibility too.

• It allows you the flexibility to hold multiple currencies, multiple asset types (including physical precious metals), and other opportunities not usually available in the US.

• It comes with a real Swiss bank account.

Of course, in the interest of balance, I should note that moving your IRA to Switzerland is more complex than opening a personal or joint account there; it needs to be done properly.

As well, most Swiss banks don’t support them, and most Swiss asset managers don’t yet either.

(The asset managers we work with do, even if, in two of those cases, we had to show them the ropes.)

New Report on How to Move Your IRA to Switzerland

If this sounds interesting to you, we just released a very detailed “SwissIRA” report to our Nestmann Inner Circle (NIC) members that explains almost everything you might want to know — how the process works, fees, timelines, and a long list of answers to questions that will likely pop up as you’re learning about this. If you’d like to review it, consider taking a risk-free trial of the NIC here.

And, of course, if you have a traditional IRA and/or Roth IRA (or even a 401(k) eligible for rollover), and are interested in seeing whether it makes sense to engage our services to help you move some of your retirement assets overseas, feel free to get in touch.

Some questions are common and others are not.

But one that needs to be asked… and answered… is:

“What sort of fees should I expect?”

That is, of course, a difficult question to answer because it depends, first and foremost, on what you’re trying to accomplish. Certain goals can justify a higher fee profile.

But beyond that, a reasonable fee takes the following into consideration:

• where you’re investing,
• what asset classes you’re investing in,
• how you’re holding it,

(It’s one of the reasons we start most of our client engagements by reviewing the options and outlining the pros and cons of each.)

In today’s discussion, I want to talk about that third point – how you hold it.

For our purposes, a holding structure is simply the “thing” that owns an asset. It can be:

• You as an individual
• You and someone else, known collectively as a joint holding
• A company (LLC, partnership, or corporation)
• A trust or trust-like structure (trust, foundation, etc.)
• A retirement account

What should it cost?

When clients engage us for planning, we first look at the details of the case.

We also have a general set of guidelines of what something “should” cost for a wide variety of cases… built up over many years of hard-won experience.

And in general, we don’t like to see an offshore structure cost more than:

• 0.75% for setup
• 0.4%-0.6% per year for ongoing maintenance and compliance.

So if you’re looking to deploy, say, a million dollars, we aim for the structure side of things to cost not more than $7,500 for setup and not more than $4,000-$6,000 per year for ongoing maintenance and compliance.

Again, that’s a guideline, not a hard and fast rule. But it gives us something to work with.

So what’s included in a setup?

• Planning to determine the best way to achieve the goal, or whether it’s even possible.
• Implementation of basic structures (US and foreign), together with US and foreign attorneys and other professionals as required.

Ongoing maintenance will include:

• US and foreign tax compliance, which means working with foreign and domestic accountants or equivalent.
• US and foreign investment-related regulatory compliance, which usually means working with foreign and domestic attorneys or similar, as well as foreign service providers depending on the type of investment.
• US and foreign structure-specific regulatory compliance, which usually means working with more foreign and domestic lawyers.
• Coordination of all the professionals involved in a case (a role we serve for clients).

Beyond the strict numbers, though, we also live according to these principles:

• Simpler is better than complicated: All else being equal, owning something personally is better than an offshore trust unless there’s a very specific reason to justify that offshore trust.
• Asset type and jurisdiction lead to the structure, not the other way around: Too many people come to us wanting an offshore trust or LLC without a clue how to best use it. That’s backwards… and expensive.
• If you don’t understand it, don’t do it: A lot of our work with clients is education – helping them understand what’s out there and the balanced case for and against. If you don’t understand the rules and how they specifically apply to your situation, it’s a lot easier to make a mistake that can cost you money.

… And one more that applies to all planning, not just the structure piece…

The “Conservative Investment” Test

All else being equal—unless there’s a really, really good reason—your ongoing structural costs should be dwarfed by the expected return of the investment.

If you’re paying more than a third of your conservative annual return just to keep the lights on, the structure is likely too expensive for the asset.

It may mean you’re over-engineering the solution. Or it could be that the investment itself isn’t big enough to justify the complexity. Either way, a red flag.

At the end of the day, if the math doesn’t work, the answer isn’t to find a cheaper provider—it’s to rethink the whole approach.

If you’re looking at a specific structure and want to see if it passes our framework test, feel free to reach out. An associate will review the basics of your case to see if it’s a fit for our firm and if so, we’ll let you know how we can help.

Best fees.

Best banks.

Best investments.

Best coffee.

(Okay, I made that last one up. Everyone knows the best coffee is found in Vienna. ;-))

But believing that the US is the best system… full stop… causes no end of trouble for clients trying to objectively figure out whether moving some of their wealth offshore is prudent or not.

It happens so often that there’s actually a name for it – home bias – as first defined in a paper by economists Kenneth French and James Poterba in 1991.

In that context, they were trying to understand why investors kept so much of their portfolio at home when investment theory suggests that a balanced portfolio across jurisdictions would result in the best overall returns.

But what applies to investors applies just as much to their advisors as well.

I was recently reminded of this fact after an index fund manager tried to scare the bejeezus out of a client of ours who’s looking at opening a Swiss investment and bank account.

He went on and on how great the US was, how stable the banking system was, and how there was no risk in keeping all the assets with Uncle Sam.

But then he was asked questions about his knowledge of the Swiss system and it became obvious he didn’t have a clue.

He was simply the wrong guy to ask. Because he could only provide one perspective.

Now, please don’t get me wrong. I’m not saying that going offshore is always the right move. I’m also not saying that keeping some of your money in the US is always the wrong move.

Like many things in life, it’s a balance.

And it depends on what you’re trying to accomplish.

But when you hire an advisor, it’s important to become aware of where their expertise and experience lie… and the bias that results from having too little knowledge in one area.

It’s important you look at their advice through the lens of that bias. Because if you know where they’re coming from, you’ll be better placed to consider their opinion in the right context.

And with that, you’ll be better placed to make the decision that’s best for you, not for them.

The US market is amazing in many ways. But when a financial advisor lets their home bias get in the way of recognizing their client’s legitimate needs, it does those clients a great disservice.

If you’re looking for a different perspective – and are wondering if moving assets internationally will help you address it, feel free to get in touch.

It was a project based in Honduras – a master-planned residential development, if memory serves.

I had already worked on a few local projects, but this was the first time I had ever worked on anything international.

At the time, I didn’t know much and had very little practical experience with such things. But I learned fast and really enjoyed it.

Then, when I was formally recruited into this industry in 2009, a lot of those efforts were put on hold.

Until relatively recently, that is. Because although I joined The Nestmann Group in 2013, it wasn’t until the last few years that foreign real estate became a major focus of our planning work.

Working on so many deals woke up my interest in international real estate. So earlier this year, I put out to my network the desire to invest in a property.

Since then, I’ve had quite a few deals sent my way. But one in particular looks very interesting… so much so that we’ve formally started due diligence.

What Makes a Deal Worth Pursuing?

But the larger question is – what made it interesting to me in the first place?

Well, just like we recommend to clients, I started this journey by answering these questions:

• Why am I investing? What’s the goal? Cashflow? Personal use? Something else?
• How do I plan to achieve those goals? A development project? Buy and improve a building? Invest in a fund?
• How do my beliefs, biases, and preferences fit in? Where should it be? What interests me most? How long am I willing to commit my funds for?

Different Goals Lead to Different Decisions

For example, if my “why” was strictly about making the most of my money, I would make different decisions than if I was investing for personal use.

If I preferred to make the most return for the least amount of hassle, I would probably avoid direct title and instead look to a limited partnership – I put up the money and leave the responsibility of managing it to someone else.

And if my preference is for a good “bug out” location far from global conflict, I’m likely to spend more time looking at a place like New Zealand than the Middle East.

Too few prospective foreign property investors seem to give this a lot of thought. But it’s important.

There are many, many opportunities out there. Being clear about what you want and what you’re willing to do about it helps you filter down the list to something designed to fit you perfectly.

P.S. If you’re interested in following along with my due diligence process, I’ve decided to make a case study out of it as part of our Nestmann Inner Circle membership. If you haven’t tried it before, or for a while, it’s really worth a look. You can learn more here.

This is important for US clients buying overseas for a number of reasons.

One of those reasons involves something no one really wants to talk about… what happens when you head on up to the pearly gates.

But if you’ve purchased foreign property — and you plan to hold it indefinitely — then estate planning will come into play at some point. And it’s something that needs some thought, no matter how uncomfortable.

Because if you don’t, your heirs are going to have to… meaning foreign probate in the worst possible scenario.

Best Practices

Now it’s virtually impossible to tell you here how to deal with foreign probate in every possible situation since:

• It has to be done country by country
• And it has to be coordinated with your US planning.

But here are a couple of rules of thumb to get you started:

EU countries

Countries in the EU are generally quite easy and straightforward. There’s an EU directive that allows foreigners holding local property to bypass the worst of local inheritance law. You do need a local will, however.

Common law countries

This includes countries that were once part of the British Empire (including Canada, the UK, and the US, broadly speaking), as well as certain other countries or areas that have specifically opted into common law to attract investors (certain places in the UAE, for example).

Generally, because they share the same legal system as your home in the US, such planning tends to be fairly easy and familiar to US clients.

Civil law countries

Countries that use civil include much of Europe outside the EU, most of Central and South America, and large swathes of Asia. They are generally harder to deal with compared to other areas.

All of this assumes you continue to be resident in the US and are not resident in the country where your property sits (residency can complicate things a bit).

So what’s the next best step?

Ask yourself these key questions

#1: Do I plan to hold the property for the long-term?

#2: If so, do I care about making it as easy as possible for my heirs?

#3: If so, what‘s the simplest way to address this estate planning issue?

So let’s start with what problem you’re trying to solve.

Here’s a starting list as we see it from our clients.

But no matter the reason, it’s not as easy as it used to be.

When I first started working with the Nestmann Group in 2013, the process was much simpler. Today, there is still a path, but it is far narrower than it used to be and often requires the right guidance.

One thing to get clear from the start: for Americans, this usually doesn’t mean opening a cheap online trading account overseas. More often, it means working through a foreign asset manager.

But what does that mean in practice? In this article, I’ll walk through what works, what doesn’t, and how to get started.

I had to clarify that there’s really no such thing – what’s best for one person in one case may be the worst for another in the same case. It’s really a question of what’s best for you.

But there are some common building blocks – holding options – that work better for some countries than others depending on the goal.

In today’s article, I’m going to share what those options are and, just as importantly, clarify the right way to go about looking at this.